================================================================================
FMC SELECT FUND
SEMI-ANNUAL REPORT
APRIL 30, 1996
ADVISED BY:
FIRST MANHATTAN CO.
================================================================================
FMC-F-003-02
<PAGE>
Dear Shareholder:
The FMC Select Fund (the "Fund") had a total return of 17.81% for the six months
ended April 30, 1996. This compares favorably with the total returns for the
same period of both the S&P 500 Index (13.76%) and the Merrill Lynch Corporate &
Government Index of one to ten year maturities (1.16%). Perhaps more relevant,
the Fund's total return exceeded that of its benchmark, which is an 80%
weighting of the S&P 500 Index and 20% weighting of the Merrill Lynch Corporate
& Government Index. The benchmark had a total return of 11.15% for the six
months ended April 30, 1996. From inception on May 8, 1995 through April 30,
1996 the Fund had a total return of 30.30% versus 20.86% for the benchmark,
25.20% for the S&P 500 Index and 4.73% for the Merrill Lynch Corporate &
Government Index. As of April 30, 1996, 84% of the Fund's assets were invested
in equities, which is towards the upper end of the targeted equity allocation of
75-85%. The remaining assets were in investment grade, medium term, fixed income
instruments and cash. While this portion of the Fund acts as a restraint on
performance in robust equity markets, such as the recent environment, it should
help preserve capital during corrections.
------------------------------
TOTAL RETURN1
------------------------------
ANNUALIZED CUMULATIVE
SINCE SINCE
INCEPTION2 INCEPTION
------------------------------
30.98% 30.30%
------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE FMC SELECT
FUND, VERSUS THE S&P 500 COMPOSITE INDEX, THE MERRILL LYNCH 1-10 YEAR CORPORATE
& GOVERNMENT INDEX, AND THE S&P 80% MERRILL 20% BLEND
(CHART)
[GRAPHIC OMITTED]
PLOT POINTS
5/31/95 4/30/96
FMC SELECT FUND $10,000 $12,775
S&P 500 COMPOSITE INDEX $10,000 $12,520
S&P 80% MERRILL 20% BLEND $10,000 $12,250
MERRILL LYNCH 1-10 YEAR CORPORATE & GOVERNMENT INDEX $10,000 $10,473
1THESE FIGURES REPRESENT PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL
FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
2THE FMC SELECT FUND COMMENCED OPERATIONS ON MAY 8, 1995.
Before discussing some of the Fund's holdings, we want to emphasize that the
equity portion of the portfolio is invested in what we believe are high quality
businesses with strong balance sheets and significantly less cyclical exposure
than the overall economy. While these qualities may be underappreciated in an
economy entering its sixth year of expansion against the backdrop of ebullient
equity markets, the businesses in the portfolio should be well positioned to
deal with adversity when the economy inevitably slows and/or interest rates rise
materially.
The table on the following page provides a weighted average statistical snapshot
of the equity portion of the Fund. The key point is that the Fund is invested in
profitable businesses selling at attractive valuations.
<PAGE>
FMC S&P
SELECT INDUSTRIALS
FUND INDEX
- --------------------------------------------------------------------------------
QUALITY
Return-on-Equity (ROE) [1] 21% 20%
Period Needed to Retire Debt from Free Cash Flow [2] 2 Years 6 Years
Estimated Annual EPS Growth for 1996-2000 13% 8%
VALUATION
1996E Price/Earnings 16.7X 17.8X
- --------------------------------------------------------------------------------
[1] The ROE is based on net income for the trailing four quarters ended 3/31/96
and the average equity over that period. ROE provides insight into both the
quality of the business and the quality of management in its use of the
shareholders' resources. Given the portfolio's heavy skewing towards businesses
with franchises that make them significantly less dependent on the business
cycle than those in the S&P, it is anticipated that the portfolio's "ROE
advantage" relative to the S&P should expand in a recession.
[2] Free cash flow is defined for this purpose as net income plus depreciation
and amortization minus capital expenditures. We have intentionally omitted
dividends from this calculation to separate the enterprise's underlying
economics, the cash generated from operations, from dividend policy, which is a
financing decision. Careful analysis of both working capital and free cash flow
is often more valuable than reported net income in evaluating changes in the
fundamentals of a business.
PORTFOLIO COMPOSITION
(CHART)
[GRAPHIC OMITTED]
Pie Chart Plot Points:
Other Equity 13%
Cash 5%
Corporate Obligations 5%
U.S. Treasury Obligations 6%
Packaging 6%
Food, Beverage & Tobacco 6%
Specialty Chemicals 7%
Financial Services 7%
Healthcare 8%,
Consumer Products 8%,
Media 9%
Bankng 9%
Retail 11%
% of Total Fund Investments
<PAGE>
We would like to discuss five equity positions, each of which has made a
significant contribution to the Fund's strong performance over the past six
months. Three of these investments, Dollar General, Tandy and InterTan, are
retailers; as the above pie chart shows, retail has become the Fund's largest
segment accounting for 11% as of April 30. All three were purchased between
December 1995 and February 1996, at the tail end of the worst retail environment
in several decades. We sifted through the carnage among retailers and identified
three businesses that are leaders in their respective categories, with the
prospect of both rising earnings and returns on capital, along with strong
franchises and market shares. Despite these attractive fundamentals, all three
businesses had seen their share prices plunge at least 35% in the strongest
stock market since 1958. They were "guilty by association" of being retailers in
an environment where, as one noted market pundit put it last December, "The
portfolio managers who own retailers will have a difficult time explaining it to
clients."
Our largest retail position is Dollar General (DG, 3.9% of the Fund), a retailer
of basic merchandise offering the most competitive pricing and most convenient
shopping format in over 2,000 mostly rural and semi-rural Southeast communities.
A typical store packs over 2,500 items, mostly priced in rounded dollars and
under $20, into about 6,000 square feet, covering about 80% of the categories in
the typical "big box" discount store which has 60,000-105,000 square feet. DG's
focus on basic merchandise, coupled with astute procurement and good inventory
control, has led to a business earning 23% on equity with minimal non-seasonal
debt. These returns are likely to continue as DG's competitive advantage
improves against conventional discount merchandisers who are building larger,
less convenient stores, and who are increasingly ignoring the value needs of the
low end consumer as they move upscale to pursue "bigger opportunities". DG's
growing competitive advantage was demonstrated by its 5% increase in same store
sales in 1995, a year when the average US retailer experienced declining same
store sales. We were able to purchase this business which has consistently grown
earnings at over 15% at a discount to the S&P, and it has provided us with a 50%
total return through April 30.
Our investment in Tandy has also been rewarding, providing a 26% total return
through April 30. Tandy's main profit source is its 6,800 ubiquitous Radio Shack
stores. In 1993 new management changed Radio Shack's strategy to focus on its
strengths, accelerating same store sales increases from flat to 6-8%. Radio
Shack had pursued a "me too" strategy of trying to compete with the consumer
electronics superstores of over 50,000 square feet such as Circuit City and Best
Buy on the basis of price. This was an impossible task given that the average
Radio Shack has less than one-tenth the size and appliance selection of the
typical superstore, and is burdened by both significantly lower inventory
turnover and significantly higher overhead per unit of sales.
Management has shifted to focusing on Radio Shack's accessories and service
businesses. Radio Shack is the largest and, in many areas, the only convenient
source of accessories for consumer electronics. The gross profit margin on these
accessories exceeds 70% and demand continues to grow more than twice the rate of
GNP as consumer electronics play a greater role in how we work, learn and play.
Radio Shack is building its service businesses in cellular telephones and
satellite television, where it has become the largest retailer of service
contracts and equipment in both categories. The firm has also launched the
"Repair Shop", making the heavy investments in training and infrastructure (over
110 repair sites) to become the largest consumer electronics repair firm in the
US. The Repair Shop has already generated over $100 million in repair sales, but
has generated significantly greater sales by converting many consumers who come
in for repairs into purchasers of new equipment. In 1995 both Sony and IBM
decided to outsource large portions of their US repair and warranty businesses
to Tandy; both firms concluded that the Repair Shop could provide their
customers with faster turnaround while significantly reducing the costs
associated with lower volume internal repair organizations. Tandy is discussing
similar repair outsourcing with a number of large consumer electronics
manufacturers. Management has used Radio Shack's $250 million of free cash flow
plus the proceeds from the divestiture of underperforming assets to repurchase
almost one-quarter of shares outstanding in the past three years.
Our investment in InterTan was driven by logic similar to that of Tandy, with
the added attraction of InterTan being available at less than "net working
capital" (current assets minus all liabilities), a rarity during the current
bull market and a rarity any time for a company which is profitable. InterTan
operates or services over 2,000 stores in Canada (Radio Shack), the UK (Tandy)
and Australia (Tandy Electronics). Like Radio Shack USA, InterTan has installed
new
<PAGE>
management which is switching the strategy from trying to be a "me too" seller
of consumer electronics hardware in a non-competitive format, to one focused on
accessories and service. While InterTan is one to two years behind Tandy in this
process, the new strategy has led to higher gross profit margins and, in recent
months, rising same store sales. InterTan has provided us with a 28% total
return through April 30.
W.R. Grace was the Fund's largest equity investment as of April 30 (4.03% of
Fund). Grace has undergone significant change since Peter Grace's death in 1995.
Al Costello, the new CEO and CEO of American Cyanamid prior to its sale to
American Home Products, was hired last May. He has aggressively reduced costs,
sold non-core assets such as the Dearborn water treatment business, and
channeled resources to the businesses with the strongest franchises to enhance
shareholder value. The primary remaining businesses will be Cryovac, the world
leader in shrink bags, films and laminates for food packaging, and Davison, the
world leader in petroleum catalysts. Cryovac is investing capital at after-tax
returns in excess of 20% and is experiencing strong growth, particularly in
Southeast Asia and Latin America, where rising incomes are driving sharp
increases in demand for packaged meat and produce. National Medical Care,
Grace's dialysis business, is being spun-out and merged with Fresenius AG's
medical business in a tax-free transaction valued at over $4 billion. Grace will
receive a $2.3 billion cash dividend from the new medical company, which it will
use to reduce debt and repurchase up to 20% of its shares. Grace has provided a
39% total return in the six months ended April 30.
Manpower accounted for 2.76% of the Fund on April 30. Manpower is the world's
largest private human capital services firm, the only firm with significant
operations in most of the industrialized nations and many of the major emerging
economies, and the firm with the strongest presence in the rapidly growing data
processing, software development and electronics manufacturing segments. We
believe that these attributes make Manpower best positioned to benefit from the
growing global trend of multinationals outsourcing to a single supplier both
non-critical functions and activities with large variances in labor. Manpower
derives 15% and a growing portion of its revenue from placements related to
information technology. The bulk of these information technology assignments are
at about $25/hour, or roughly twice the average for non-information technology
assignments, and are for longer periods, lessening Manpower's overhead costs and
adding predictability to its revenue stream. The use of temporary employees in
the industrialized world is expected to double by 2010 with the information
technology segment expected to increase almost four-fold. Manpower is a business
with good economics, earning a 27% return on equity on a balance sheet without
net debt. Unlike the typical Fortune 500 company, most of Manpower's earnings
represent surplus capital, in that they are not needed for reinvestment in plant
and equipment. Our investment in Manpower has appreciated by 34% through April
30.
We trust that this report has given you useful insights into how we are managing
your assets. We appreciate your confidence.
SINCERELY YOURS,
/s/ BERNARD GROVEMAN /s/ WILLIAM MCELROY /s/ A. BYRON NIMOCKS
BERNARD GROVEMAN WILLIAM MCELROY A. BYRON NIMOCKS
EQUITY MANAGER FIXED INCOME MANAGER EQUITY MANAGER
<PAGE>
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
Market
Value
FMC SELECT FUND Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (84.4%)
AUTO & TRUCK RELATED (1.2%)
Mark IV Industries .............................. 22,470 $ 466
-------
Total Auto & Truck Related .................... 466
-------
BANKS (8.8%)
Charter One Financial ........................... 7,300 255
Compass Bancshares .............................. 15,400 516
Dime Bancorp * .................................. 52,100 638
North Fork ...................................... 31,500 748
TF Financial .................................... 32,000 452
Wells Fargo ..................................... 3,500 849
-------
Total Banks ................................... 3,458
-------
CONSUMER PRODUCTS (8.2%)
American Greetings, Cl A ....................... 19,400 536
Ekco Group ...................................... 168,600 1,033
Gillette ........................................ 11,400 616
Kimberly-Clark .................................. 14,300 1,039
-------
Total Consumer Products ....................... 3,224
-------
FINANCIAL SERVICES (7.1%)
Federal Home Loan Mortgage Corporation .......... 18,000 1,501
Fidelity National Financial ..................... 39,600 535
Northern Trust .................................. 13,400 754
-------
Total Financial Services ...................... 2,790
-------
FOOD, BEVERAGE & TOBACCO (6.4%)
Sara Lee ........................................ 8,900 276
Schweitzer-Mauduit International* ............... 50,000 1,356
UST ............................................. 27,000 864
-------
Total Food, Beverage & Tobacco ................ 2,496
-------
HEALTHCARE (7.8%)
Johnson & Johnson ............................... 3,700 342
Pfizer .......................................... 9,200 634
Sierra Health Services* ......................... 45,500 1,501
U.S. Healthcare ................................. 11,400 594
-------
Total Healthcare .............................. 3,071
-------
HOTEL & LODGING (2.8%)
Red Roof Inns* .................................. 72,200 1,083
-------
Total Hotel & Lodging ......................... 1,083
-------
<PAGE>
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
Market
Value
FMC SELECT FUND Shares (000)
- --------------------------------------------------------------------------------
MEDIA (9.1%)
E.W. Scripps, CI A .............................. 13,000 $ 553
Gannett ......................................... 20,400 1,395
Harte-Hanks Communications ...................... 34,050 804
Omnicom Group ................................... 18,400 798
-------
Total Media ................................... 3,550
-------
MISCELLANEOUS SERVICES (2.8%)
Manpower ........................................ 29,200 1,080
-------
Total Miscellaneous Business Services ......... 1,080
-------
MULTIPLE INDUSTRY (2.4%)
General Electric ................................ 12,200 945
-------
Total Multiple Industry ....................... 945
-------
PACKAGING (6.2%)
Sealed Air * .................................... 23,600 835
W.R. Grace ...................................... 20,400 1,581
-------
Total Packaging ............................... 2,416
-------
RAILROADS (3.8%)
Burlington Northern Santa Fe .................... 8,600 753
Southern Pacific Rail * ......................... 30,000 750
-------
Total Railroads ............................... 1,503
-------
RETAIL (11.0%)
CML Group ....................................... 42,700 192
Dollar General .................................. 57,375 1,513
InterTan* ....................................... 165,000 990
Melville ........................................ 13,500 525
Tandy ........................................... 21,000 1,089
-------
Total Retail .................................. 4,309
-------
SPECIALTY CHEMICALS (6.8%)
Great Lakes Chemical ............................ 10,700 730
Loctite ......................................... 14,700 742
McWhorter Technologies* ......................... 24,300 437
Sherwin-Williams ................................ 16,600 776
-------
Total Specialty Chemicals ..................... 2,685
-------
TOTAL COMMON STOCK
(Cost $26,789,565) ............................ 33,076
-------
<PAGE>
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
Face Market
Amount Value
FMC SELECT FUND (000) (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (5.8%)
U.S. Treasury Bills
5.290%, 05/02/96 ................................ $ 8 $ 8
4.930%, 05/09/96 ................................ 259 259
5.220%, 05/16/96 ................................ 119 119
5.320%, 05/30/96 ................................ 31 31
5.040%, 06/27/96 ................................ 20 20
4.910%, 07/05/96 ................................ 394 390
5.130%, 07/11/96 ................................ 132 131
4.820%, 07/18/96 ................................ 150 148
5.420%, 07/25/96 ................................ 31 31
5.100%, 08/15/96 ................................ 335 330
U.S. Treasury Notes
8.750%, 08/15/00 ................................ 250 272
8.000%, 05/15/01 ................................ 250 266
7.500%, 11/15/01 ................................ 250 262
------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,271,011) ............................... 2,267
------
U.S. GOVERNMENT AGENCY OBLIGATIONS (2.9%)
Aid-Israel Ser 1-A
7.750%, 04/01/98 ................................ 163 167
Federal Home Loan Mortgage Corporation
6.830%, 06/15/05 ................................ 250 241
Farm Credit System Financial Assistance
9.380%, 07/21/03 ................................ 200 228
Federal National Mortgage Association
8.500%, 01/13/00 ................................ 250 253
Federal National Mortgage Association
Principal STRIPS, Zero Coupon
0.000%, 11/01/01 ................................ 250 242
------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,150,274) ............................... 1,131
------
<PAGE>
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
Face Market
Amount Value
FMC SELECT FUND (000) (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (4.8%)
Aon
7.400%, 10/01/02 .................................. $ 150 $ 152
BellSouth Trust MTN
9.190%, 07/01/03 .................................. 207 225
Commercial Credit
7.750%, 03/01/05 .................................. 150 155
Eastman Kodak
9.750%, 10/01/04 .................................. 200 235
Geico
7.500%, 04/15/05 .................................. 200 205
General Motors
8.950%, 07/02/09 .................................. 200 217
Marriott International
7.880%, 04/15/05 .................................. 200 204
Philip Morris
7.250%, 01/15/03 .................................. 150 150
United Postal Savings Association
9.000%, 07/26/99 .................................. 150 162
W. R. Grace
8.000%, 08/15/04 .................................. 200 203
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TOTAL CORPORATE OBLIGATIONS
(Cost $1,961,545) ................................. 1,908
-------
TOTAL INVESTMENTS (97.9%)
(Cost $32,172,395) ................................ 38,382
-------
OTHER ASSETS AND LIABILITIES, NET (2.1%) ............ 812
-------
NET ASSETS:
Portfolio shares (unlimited authorization,
no par value) based on 3,056,590
outstanding shares of beneficial interest ......... 32,106
Undistributed net investment income ................. 17
Accumulated net realized gain on
investments ....................................... 861
Net unrealized appreciation on investments .......... 6,210
-------
TOTAL NET ASSETS (100.0%) ........................... $39,194
=======
Net Asset Value, Offering Price and
Redemption Price Per Share ........................ $ 12.82
=======
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
MTN -- MEDIUM TERM NOTE
STRIPS -- SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL SECURITIES
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS
For the six-month period ended April 30, 1996 (Unaudited)
FMC
SELECT
FUND
-----------
11/01/95
TO 4/30/96
(000)
- --------------------------------------------------------------------------------
Investment Income:
Dividend Income............................................... $ 207
Interest Income .............................................. 156
- --------------------------------------------------------------------------------
Total Investment Income..................................... 363
- --------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ..................................... 132
Reimbursements by Adviser .................................... (19)
Administrative Fees .......................................... 37
Custodian Fees ............................................... 3
Professional Fees ............................................ 6
Transfer Agent Fees .......................................... 10
Printing Fees ................................................ 3
Directors' Fees .............................................. 3
Registration and Filing Fees ................................. 4
Insurance and Other Fees ..................................... 1
Amortization of Deferred Organizational Costs ................ 2
- --------------------------------------------------------------------------------
Total Expenses ............................................. 182
- --------------------------------------------------------------------------------
Net Investment Income .................................... 181
- --------------------------------------------------------------------------------
Net Realized Gain from Securities Sold ....................... 861
Net Unrealized Appreciation of Investment Securities ......... 4,262
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments ............ $5,123
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations.......... $5,304
================================================================================
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS..
For the six-month period ended April 30, 1996 (Unaudited) and for the period
ended October 31.
FMC
SELECT
FUND
----------------------------
11/01/95 05/08/95(1)
TO 04/30/96 TO 10/31/95
(000) (000)
- -----------------------------------------------------------------------------
Investment Activities:
Net Investment Income.......................... $ 181 $ 222
Net Realized Gain on Securities Sold .......... 861 77
Net Change in Unrealized Appreciation
of Investment Securities .................... 4,262 1,948
- -----------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations............................ 5,304 2,247
- -----------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ......................... (187) (199)
Realized Capital Gains......................... (77) --
- -----------------------------------------------------------------------------
Total Distributions ......................... (264) (199)
- -----------------------------------------------------------------------------
Capital Share Transactions:
Shares Issued ................................. 7,557 25,763
Shares Issued in Lieu of Cash Distributions ... 183 --
Shares Redeemed ............................... (788) (609)
- -----------------------------------------------------------------------------
Increase in Net Assets Derived from
Capital Share Transactions................... 6,952 25,154
- -----------------------------------------------------------------------------
Total Increase in Net Assets ................ 11,992 27,202
- -----------------------------------------------------------------------------
Net Assets:
Beginning of Period ............................ 27,202 --
- -----------------------------------------------------------------------------
End of Period .................................. $39,194 $27,202
=============================================================================
Shares Issued and Redeemed:
Shares Issued .................................. 626 2,536
Shares Issued in Lieu of Cash Distributions .... 15 --
Shares Redeemed ................................ (63) (57)
- -----------------------------------------------------------------------------
Net Increase in Share Transactions ........... 578 2,479
=============================================================================
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) The FMC Select Fund commenced operations on May 8, 1995
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
For the six-month period ended April 30, 1996 (Unaudited) and for the period
ended October 31.
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Distributions Distributions Asset Assets Ratio
Value Net Unrealized from Net from Value End of Expenses
Beginning Investment Gains on Investment Capital End Total of Period to Average
of Period Income Securities Income Gains of Period Return(1) (000) Net Assets
---------- --------- ----------- ------------ ------------ --------- -------- --------- -----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------
FMC SELECT FUND
- ---------------
1996 $10.97 0.06 1.88 (0.06) (0.03) $12.82 17.81% $39,194 1.10%*
1995(3) $10.00 0.10 0.96 (0.09) -- $10.97 10.60% $27,202 1.10%*
</TABLE>
Ratio
Ratio of Net
Ratio of Expenses Income
of Net to Average to Average
Income Net Assets Net Assets Portfolio Average
to Average (Excluding (Excluding Turnover Commission
Net Assets Reimbursements) Reimbursements) Rate Rate (2)
---------- -------------- -------------- --------- ----------
- ---------------
FMC SELECT FUND
- ---------------
1996 1.09%* 1.22%* 0.97%* 15.70% $0.06
1995(3) 1.96%* 1.57%* 1.49%* 1.87% --
* Annualized
(1) Total return is for the period indicated and has not been annualized.
(2) Average commission rate paid per share for the security purchases and sales
made during the period.
(3) The FMC Select Fund commenced operations on May 8, 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS FMC SELECT FUND
April 30, 1996 (Unaudited)
1. ORGANIZATION:
THE ADVISORS' INNER CIRCLE FUND (the "Trust") is organized as a Massachusetts
business trust under a Declaration of Trust dated July 18, 1991. The Trust is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company with nine portfolios. The
financial statements herein present those of the FMC Select Fund (the "Fund").
The financial statements of the remaining portfolios are not presented herein.
The assets of each portfolio are segregated, and a Shareholder's interest is
limited to the portfolio in which shares are held. The Funds' prospectus
provides a description of each Fund's investment objectives, policies and
strategies.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by
the Fund.
SECURITY VALUATION -- Investments in equity securities which are traded on
a national exchange (or reported on the NASDAQ national market system) are
stated at the last quoted sales price if readily available for such equity
securities on each business day; other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt
obligations exceeding sixty days to maturity for which market quotations
are readily available are valued at the most recent quoted bid price. Debt
obligations with sixty days or less remaining until maturity may be valued
at their amortized cost, which approximates market value.
FEDERAL INCOME TAXES -- It is the Fund's intention to qualify as a
regulated investment company by complying with the appropriate provisions
of the Internal Revenue Code of 1986, as amended. Accordingly, no provision
for Federal income taxes is required.
SECURITY TRANSACTIONS AND RELATED INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Costs used in determining realized gains and losses on the sales of
investment securities are those of the specific securities sold, adjusted
for the accretion and amortization of purchase discounts or premiums during
the respective holding period which is calculated using the effective
interest method. Interest income is recognized on the accrual basis.
Dividend income is recorded on the ex-date.
NET ASSET VALUE PER SHARE -- The net asset value per share of the Fund is
calculated on each business day by dividing the total value of assets, less
liabilities, by the number of shares outstanding.
OTHER -- Expenses that are directly related to the Fund are charged to the
Fund. Other operating expenses of the Trust are prorated to the Fund on the
basis of relative daily net assets.
Distributions from net investment income are declared and paid to
Shareholders quarterly. Any net realized capital gains are distributed to
Shareholders at least annually.
Distributions from net investment income and net realized capital gains are
determined in accordance with the U.S. Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. To the extent these differences are permanent, they
are charged or credited to paid-in-capital in the period that the
differences arise. These reclassifications have no effect on net assets or
net asset value.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. Organization Costs and Transactions with Affiliates:
The Fund incurred organization costs of approximately $22,000. These costs have
been capitalized by the Fund and are being amortized over sixty months com-
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) FMC SELECT FUND
April 30, 1996 (Unaudited)
mencing with the start-up. In the event the initial shares of the Fund are
redeemed by any holder thereof during the period that the Fund is amortizing its
organizational costs, the redemption proceeds payable to the holder thereof by
the Fund will be reduced by the unamortized organizational costs in the same
ratio as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption. These costs include legal
fees of approximately $11,000 for organizational work performed by a law firm of
which a trustee of the Trust is a partner and two officers of the Trust are
partners.
Certain officers of the Trust are also officers of SEI Financial Management
Corporation (the "Administrator") and/or SEI Financial Services Company (the
"Distributor"). Such officers are paid no fees by the Trust for serving as
officers of the Trust.
4. Administration, Shareholder Servicing and Distribution Agreements:
The Trust and the Administrator are parties to an Administration Agreement under
which the Administrator provides management and administrative services for an
annual fee equal to the higher of $75,000 or .20% of the Fund's average daily
net assets.
DST Systems Inc. (the "Transfer Agent") serves as the transfer agent and
dividend disbursing agent for the Fund under a transfer agency agreement with
the Fund.
The Trust and Distributor are parties to a Distribution Agreement. The
Distributor receives no fees for its distribution services under this agreement.
5. Investment Advisory and Custodian Agreements:
The Fund and First Manhattan Co. (the "Adviser") are parties to an Investment
Advisory Agreement under which the Adviser receives an annual fee equal to .80%
of the Fund's average daily net assets. The Adviser has, on a voluntary basis,
agreed to reimburse Fund expenses in order to limit the Fund's total operating
expenses to a maximum of 1.10% of the average daily net assets of the Fund. The
Adviser reserves the right to terminate this arrangement at any time in its sole
discretion.
CoreStates Bank, N.A. acts as custodian (the "Custodian") for the Fund. Fees of
the Custodian are being paid on the basis of the net assets of the Fund. The
Custodian plays no role in determining the investment policies of the Fund or
which securities are to be purchased and sold by the Fund.
6. Investment Transactions:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the period ended April 30, 1996 are as follows:
FMC SELECT
FUND
(000)
---------
Purchases
Government .......................... $ 712
Other ............................... 10,990
Sales
Government .......................... $ 298
Other ............................... 4,666
At April 30, 1996, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Fund
at April 30, 1996, is as follows:
FMC SELECT
FUND
(000)
---------
Aggregate gross unrealized
appreciation ........................ $6,439
Aggregate gross unrealized
depreciation ........................ (229)
------
Net unrealized appreciation ........... $6,210
======
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================================================================================
FUND:
FMC SELECT FUND
P.O. Box 419009
Kansas City, MO 64141-6009
ADVISER:
FIRST MANHATTAN CO.
437 Madison Avenue
New York, NY 10022
TRUST:
THE ADVISORS' INNER CIRCLE FUND
680 East Swedesford Road
Wayne, PA 19087
DISTRIBUTOR:
SEI FINANCIAL SERVICES CORPORATION
680 East Swedesford Road
Wayne, PA 19087
ADMINISTRATOR:
SEI FINANCIAL MANAGEMENT COMPANY
680 East Swedesford Road
Wayne, PA 19087
LEGAL COUNSEL:
MORGAN, LEWIS & BOCKIUS LLP
1800 M Street N.W.
Washington, DC 20036
INDEPENDENT PUBLIC ACCOUNTANTS:
ARTHUR ANDERSEN LLP
1601 Market Street
Philadelphia, PA 19103
This information must be preceded or accompanied by a
current prospectus for the Fund described.
FMC-F-003-02
================================================================================
